22 May 2010

Bank not to deny loan to management quota students: High Court

In a recent decision the Madras High Court has declared that it is not open to Banks to deny loan to students on the ground that they have been granted under Management quota. The High Court noted that the guidelines of the Reserve Bank of India to this regard were clear and there was no regulation that the students who got admission under Management quota were debarred from availing the loan. Holding that introduction of such alien criteria was arbitrary and contrary to the settled principles of law, the High Court directed the Bank to sanction the loan to such students. 

The High Court inter alia observed as under;
11. In the impugned order the second respondent has stated that since the petitioner has secured admission in management quota and not went through the selection process, the petitioner is not eligible to get sanction of education loan. The said stand of the respondents is contrary to the scheme announced by the respondents viz., Vidya Jyothi Educational Loan Scheme. Though in the said scheme it is stated that admission could be claimed by writing entrance examination, it is common knowledge to all concerned that in the state of Tamil Nadu no entrance examination is conducted for admission to B.E. Degree course or for any professional course. Admittedly there are two modes of admissions to professional course in self-financing colleges in the state of Tamil Nadu viz., Government quota, i.e., candidates are selected through single window selection and management quota. The said allocation of seats is also approved every year by the Monitoring Committee headed by a retired High Court Judge, constituted by the State Government as per the Judgment of the Supreme Court in the decision reported in (2003) 6 SCC 697 (Islamic Academy of Education v. State of Karnataka) and (2005) 6 SCC 537 (P.A.Inamdar v. State of Maharashtra).
12. The fact that the petitioner was selected and admitted in the management quota seat and pursuing his studies cannot be a debarment for submitting application to avail education loan. It is not the case of the respondents that the petitioner is not eligible to be admitted in the B.E degree course due to lack of minimum marks, age or otherwise. Once eligibility for admission is established and a candidate is selected through anyone of the mode of selection, which is permitted by the Monitoring Committee and the University having approved the admission of the petitioner, it is not open to the respondent bank to refuse loan facility viz., education loan to a deserving candidate like the petitioner. The Central Government as well as the Reserve Bank of India gave guidelines to the banking sectors to sanction education loan to all deserving candidates. The requirements, the banks can insist upon is whether the candidate is eligible to be admitted in the course, whether the course is approved by the competent body, and whether the college is affiliated to the University which conducts examinations. 
13. The Schemes and Policies are framed by the Central Government and the benefit should reach the deserving persons. Rejecting the claim of education loan to the petitioner by the second respondent by raising untenable and hypertechnical ground establishes the mindset of the person, who is in charge of the bank. The Bank is not entitled to take a rigid and hairsplitting interpretation in cases like this, without bearing in mind the object of the Scheme. In all other Banks, education loan is sanctioned to students admitted in management quota. In some cases though initially the loan applications were not considered favourably, on receiving notice, the concerned banks readily sanctioned loans on the basis of valuable legal advise given by the standing counsels. If the attitude of the respondent bank is accepted or given a seal of approval, it would be discriminatory and violative of Article 14 of the Constitution of India, which prohibit discriminatory treatment to a citizen. The higher officials of the respondent bank are bound to give proper instructions to branch Managers as to how the applications seeking education loan are to be processed, so that such kind of unreasonable attitude can be avoided.
14. It is well settled principle of law that while interpreting the Scheme, the object of the scheme is to be borne-in-mind. The second respondent has not even suspected the repaying capacity of the petitioner or that of his parents in the impugned order. The reason stated in the order is patently illegal and the impugned order is passed without application of mind. The second respondent also failed to give any opportunity of hearing to the petitioner before declining education loan, which has got civil consequences. Thus, there is violation of principles of natural justice. 
16. Applying the principle laid down in the above said judgment to the facts of this case and the only reason to deny the educational loan by the respondent bank being that the petitioner is admitted in the management quota, I am of the view that the respondents are not justified in rejecting the claim of the petitioner as there is no prohibition to sanction education loan to students admitted in the management quota. If the stand taken by the respondents is accepted, no student admitted under the management quota in any private self-financing college will be in a position to get education loan, which will defeat the purpose for which the Government of India and Reserve Bank of India introduced the scheme. 
17. The action of the respondents in giving narrow interpretation to the scheme and denying loan to the deserving candidate like the petitioner cannot be sustained as the same is found arbitrary.

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